Your directors have the pleasure in presenting the 39th Annual Report
together with the audited financial statements of the Company for the financial year ended
March 31, 2023. The summarised financial results of the Company are presented hereunder:
Financial Results - Financial Highlights
Rs in Crores
Particulars |
FY 2022 - 23 |
FY 2021 -22 |
Revenue from Operations |
1,520.85 |
1,254.06 |
Other Income |
8.08 |
2.11 |
Expenses |
724.19 |
651.96 |
Profit before tax |
804.73 |
604.21 |
Tax expenses |
201.24 |
150.66 |
Profit after tax |
603.50 |
453.54 |
Other comprehensive income |
(2.21) |
(2.23) |
Total comprehensive income |
601.29 |
451.31 |
Asset under management |
6,914.83 |
5,067.07 |
Your Company has adopted Indian Accounting Standards (IND AS) notified under Section
133 of Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules 2015.
Material Developments Initial Public Offer
During the financial year ended March 31, 2023, your Company, has successfully
completed Initial Public Offer (“IPO” or “Issue”) of the 33,512,901
equity shares of face value of INR 1 each at a price of INR 474.00 per equity share,
including premium of INR 473.00 per equity share aggregating to INR 1588.51 Crores through
offer for Sale of equity shares by TPG Asia VII SF Pte. Ltd, Matrix Partners India
Investment Holdings II LLC, Matrix Partners India Investments II Extension LLC, SCI
Investments V and Norwest Venture Partners X - Mauritius, as named in the prospectus, and
the shares of the Company were listed in National Stock Exchange (NSE) and Bombay Stock
Exchange (BSE) w.e.f November 21, 2022. The Annual Listing Fees for the financial year
2023-24 has been paid by your Company to both the Stock Exchanges.
Despite the difficult market conditions under which the IPO got consummated, noteworthy
investors subscribed to the issue which reflects their confidence in your Company. Your
Directors wish to place on record their gratitude for the trust, faith and confidence
reposed by the institutional investors, public, and other shareholders in the Company even
during the challenging environment, thus making the IPO successful.
Your Directors also place on record their deep appreciation for the significant
contribution and sincere efforts made in the IPO process by the Merchant Bankers, legal
counsels to the offer, Registrar to the Offer, Advertising Agency, Syndicate Members,
Monitoring Agency, Bankers to the Offer, the Reserve Bank of India, Registrar of Companies
- Chennai, Stock Exchanges, Management Team and Employees of the Company.
Review of Operations
Your Company is registered as a Systemically Important Non-deposit taking Non-Banking
Finance Company (NBFC-ND SI) with the Reserve Bank of India. Your Company provides secured
financial solutions to micro entrepreneurs, individuals involved in small businesses and
self-employed individuals for their business needs, asset creation requirements and to
meet the other significant economic needs of the household. Most of these borrowers are
hitherto excluded from the formal financial ecosystem and their credit needs are met
primarily by unorganised institutions, friends and family.
Given that these borrowers lack formal and structured evidences of their incomes, your
Company has built a proprietary underwriting model to evaluate their cash flows backed by
robust monitoring and strong recovery mechanisms. Your Company continues to meet the
credit needs of these borrowers, helps them graduate to the formal lending ecosystem
giving them access to relatively lower cost finance and enabling them to repay their loan
over the stipulated tenure of their loan while indulging in fair and transparent lending
and collections practices.
The operating and financial performance of your Company has been covered in detail in
the Management Discussion and Analysis report (“MDA”), which forms a part of
this report. During the year, your Company has achieved stellar results across operational
and financial metrics, which are laid down below.
Operational Metrics Disbursements
The Company caters to the financing needs of individuals involved in small businesses
and self-employed individuals who satisfy the underwriting requirements laid down by your
Company based on various parameters such as customer profile, liquidity/cashflow of the
borrower, credit history, debt burden ratio (DBR) and loan to value (LTV). During the
financial year ended March 31, 2023, your Company has disbursed INR 3,391.44 Crores of
Loans as against INR 1,756.24 Crores during the previous financial year, registering a
year-on-year (YoY) growth of 93%. The average ticket size as on March 31, 2023, stood at
INR 3.03 lakhs as against average ticket size of INR 2.66 lakhs for the disbursals during
year ended March 31, 2022.
Branch Metrics
Your Company follows a contiguous branch expansion strategy, which was continued in the
current financial year as well. During the financial year
ended March 31, 2023 your Company has added 73 new branches resulting in the branch
network increasing to 373 from 300 during the previous financial year.
Your Company now operates in the states of Tamilnadu, Andhra, Karnataka, Telangana,
Madhya Pradesh, Maharastra, Chhattisgarh and Uttar Pradesh. The details of branch network
as of March 31, 2023 and compared against the previous financial year are given below:
States |
March 31, 2023 |
March 31, 2022 |
Tamil Nadu (including Pondicherry) |
106 |
98 |
Andhra Pradesh |
121 |
79 |
Telangana |
59 |
45 |
Karnataka |
33 |
33 |
Madhya Pradesh |
44 |
37 |
Maharashtra |
6 |
4 |
Chhattisgarh |
3 |
3 |
Uttar Pradesh |
1 |
1 |
Total |
373 |
300 |
Financial Metrics
During the year under review, your Company has reported a total revenue from operations
of INR 1,528.93 Crores, as against INR 1,256.17 Crores with a growth of 21.71% over
previous financial year. Profit before tax was at INR 804.73 Crores as against INR 604.21
Crores with a growth of 33.19% over the previous financial year. Profit after Tax was at
INR 603.50 Crores as against INR 453.54 Crores with a growth of 33.06% over the previous
financial year. The Company's net worth stood at INR 4,339.53 Crores as on March 31, 2023
(INR 3,710.35 Crores as of March 31, 2022).
The total loan assets under management as at March 31, 2023, increased to INR 6,914.83
Crores from INR 5,067.08 Crores during the previous financial year registering a growth of
36.47%.
Asset Quality
Your Company has a strong collection and proactive recovery management system leading
to robust asset quality for the financial year ended March 31, 2023, when it had a Gross
Stage 3 Assets of 1.36%, which is one of the best amongst companies operating in this
customer segment. Despite the impact of 2 waves of COVID, your Company has managed to
achieve one of the best asset qualities for the financial year, which is a testimony to
your Company's business model, rigorous underwriting norms, strong execution capability
and the never-say-no attitude of an amazing team.
During the year ended March 31, 2023, your Company also implemented the daily DPD
recognition and revised upgradation norms issued by RBI vide their circulars on Prudential
Norms on Income recognition and Asset classification dated November 12, 2021 and February
15, 2022 (wherein implementation of upgradation norms were deferred to October 1, 2022),
which are to be implemented by all Regulated Entities with effect from October 1, 2022.
Your Company is in adherence to the provision of Ind AS with respect to computation of
Gross Stage 3 Assets. Your Company's assets have been classified into various stages based
on expected performance. Exposure at Default (EAD) is the total amount outstanding
including accrued interest as on the reporting date. For the year ended March 31, 2023,
your Company reported Gross Stage 3 Assets and Net Stage 3 Assets (under the revised
Income Recognition and Asset Classification norms) of 1.36% and 0.69% respectively as
against 1.05% and 0.68% respectively in the previous financial year (loans that are more
than 90 days past due as at the end of the financial year classified as Gross Stage 3
Assets).
Resource Mobilization
Your Company's overall borrowing is guided by a policy duly approved by the Board of
Directors. Your Company has vide special resolution passed on April 22, 2021, under
Section 180 (1)(c) of the Act, authorized the Board of Directors to borrow money upon such
terms and conditions as the Board may think fit in excess of the aggregate of paid up
share capital and free reserves of the Company up to an amount of INR 7000 Crores.
Your Company manages its borrowing structure through prudent Asset- Liability
Management and takes various measures, which include diversification of funding sources,
tenure optimization, and prudent borrowing timing to maintain its borrowing cost at
optimum level.
During the financial year under review, your Company continued to broad base its
funding sources by borrowing moneys from banks in the form of term loans, issuance of
Secured Non-Convertible Debentures through the private placement route, and issuance of
Pass-through Certificates as part of Securitization transactions. Your Company has also
further diversified its borrowing by adding 4 (Four) new lenders/Financial Partners.
The weighted average borrowing cost as at March 31, 2023 was 10.12% (including
Securitization transactions) as against 10.51% in the previous financial year. As at March
31, 2023, your Company's sources of funding were primarily term loans from banks and
financial institutions (62%), followed by Securitization (24%), Non-Convertible Debentures
(12%), and External Commercial Borrowings (2%).
Term Loans from Banks and Financial Institutions
During the financial year under review, your Company has availed fresh borrowings
aggregating to INR 3,103.56 Crores, including fresh Term Loans from Banks and Financial
Institutions of INR 2,245.00 Crores. The outstanding Total Borrowings as at March 31, 2023
were INR 4,247.28 Crores. The weighted average tenure of fresh loans raised during the
financial year under review was around 59 months.
Securitization of Loan Portfolio
Your Company has actively tapped the Securitization (PTC) market, which has enabled it
to create liquidity, reduce the cost of funds and minimize asset liability mismatches.
During the financial year under review, your Company has securitised receivables worth
INR 901.50 Crores for a sale consideration of INR 809.56 Crores. These Securitisation
transactions were carried out in line with RBI guidelines on Securitization of Standard
Assets and accounted in line with Indian Accounting Standards.
Debentures
During the financial year, your Company has issued INR 49 Crores fresh Non-Convertible
Debentures (NCDs). Further, your Company has been very prompt in payment of its interest
and principal obligations for the financial year ended March 31, 2023, and has complied
with all the disclosure requirements stipulated under SEBI (LODR) Regulations, 2015.
Commercial Paper (CP)
Your Company has not issued any Commercial Paper & Short-Term Instrument during the
financial year.
Prospects
The credit business has large potential in India, particularly in respect to lending to
micro-entrepreneurs and self-employed individuals, who do not have access to formal means
of financing. The CRISIL report on market potential, which is part of the Offer documents
of your Company, pegs this demand at 22 trillion. Your directors are confident that the
knowledge/ experience gained so far in this segment will augur well towards building a
robust portfolio. Further details with respect to industry and Company prospects and other
aspects relating to your Company's operations have been covered in the Management
Discussion and Analysis section, which forms part of this report.
Statutory and Regulatory Compliances
Your Company is a Non Deposit Taking Systematically Important NonBanking Financial
Company (NBFC-ND-SI). The Company has complied with and continues to comply with all
applicable regulations, directions and prudential norms of the Reserve Bank of India.
Your Company has complied with the applicable regulations under SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015 (SEBI (LODR), 2015) and Foreign
Exchange Management Act (FEMA), 1999, Rules and Regulations thereunder.
Your Company has also complied with the applicable provisions of the Secretarial
Standards issued by the Institute of Company Secretaries of India and has complied with
all applicable compliances as required under the Companies Act, 2013.
Scale Based Regulation (SBR) - Revised Regulatory Framework for NBFCs
The Reserve Bank of India issued its final directions on Scale Based Regulatory
Framework, which becomes effective from October 1, 2022. Recognising contribution of NBFCs
towards supporting real economic activity and their role as a supplemental channel of
credit intermediation alongside banks, RBI has identified the need to align the regulatory
framework for NBFCs keeping in view their changing risk profile.
The SBR framework encompasses different facets of regulation of NBFCs covering capital
requirements, governance standards, prudential regulation, etc. and RBI has come out with
an integrated regulatory framework for NBFCs under SBR providing a holistic view of the
SBR structure, set of fresh regulations being introduced and respective timelines.
Regulatory structure for NBFCs shall comprise of four layers based on their size,
activity, and perceived riskiness. Given the asset size of your Company, it falls under
the Middle Layer category. Your Company has also complied with all the relevant
regulations under this new regulatory framework.
Credit Rating
During the year under review, credit rating of your Company has been upgraded to AA-
(Double A Minus) with Stable outlook by ICRA Limited and India Ratings & Research
Private Limited for its bank loans and NCDs.
As of March 31, 2023, your Company's borrowings / debentures enjoy the following
ratings from ICRA, India Ratings & Research, CARE Ratings & CRISIL.
Rating Agency |
Instrument |
Rating |
ICRA |
Bank Facilities |
ICRA AA-; Stable |
|
Non-Convertible Debentures |
ICRA AA-; Stable |
|
Market Linked Debentures (MLD) |
PP-MLD ICRA AAA(CE); Stable /PP-MLD ICRA AA-; Stable |
|
Securitization |
ICRA AAA(SO)/AA+(SO)/AA(SO) |
India Ratings & Research |
Bank Facilities |
IND AA- / Stable |
|
Non-Convertible Debentures |
IND AA- / Stable |
CARE |
Long term Bank Facilities |
CARE A+; Stable |
|
Long term/Short term Bank facilities |
CARE A+; Stable / CARE A1+ |
|
Non-Convertible Debentures |
CARE A+; Stable |
|
Market Linked Debentures (MLD) |
CARE PP-MLD A+; Stable |
|
Commercial Paper |
CARE A1+ |
CRISIL |
DA under PCG Scheme of GoI |
CRISIL AA (SO) / AA- (SO) |
Change in Nature of Business
There was no change in the nature of business of your Company during the financial year
ended March 31, 2023.
Dividend Distribution Policy
Your Company has formulated a Dividend Distribution Policy, with an objective to
provide the dividend distribution framework to the Stakeholders of the Company. The policy
sets out various internal and external factors, which shall be considered by the Board in
determining the dividend pay-out. The policy is available on the website of the Company at
https://fivestargroup.in/investors/.
Dividend
Your Directors have decided not to recommend any dividend for the financial year ended
March 31, 2023, and the profit for the year will be deployed back into the business.
Transfer to Reserves
Your Company has transferred a sum of INR 120.70 Crores to the statutory reserve as
required under the Reserve Bank of India Act, 1934.
Deposits
Your Company is a non-deposit taking Company. The Company has not accepted any public
deposits during the financial year under review and has passed a Board resolution
acknowledging the non-acceptance of deposits from public.
Capital Adequacy Ratio
Capital Adequacy Ratio of your Company as at March 31, 2023 under Ind-AS stood at
67.17%, as against the minimum requirement of 15% stipulated by Reserve Bank of India.
Changes in Equity Share Capital
During the financial year, your Company has:
a. Allotted 4,000 fully paid-up equity shares of INR 1 each on June 8, 2022, pursuant
to Five-Star Associate Stock Option Scheme 2015
b. Allotted 19,000 fully paid-up equity shares of INR 1 each on June 8, 2022, pursuant
to Five-Star Associate Stock Option Scheme 2018
The Company has only one class of equity shares and the authorised share capital of the
Company as on March 31, 2023, was INR 55,00,00,000/- divided into 55,00,00,000 equity
shares of INR 1 each, subscribed, issued & paid-up capital as on said date is
29,13,66,120 equity shares of INR 1 each.
Subsidiaries, Joint Ventures, Associate Companies
During the financial year ended March 31, 2023, your Company does not have a subsidiary
/ Associate / Joint Venture Company. Also, the Company did not become a part of any Joint
Venture during the year.
Related Party Transactions
The Company has in place a policy on related party transactions as approved by the
Board and the same is available on the website of the Company at
https://fivestargroup.in/investors/.
All related party transactions that were entered into during the financial year were on
arm's length basis and in ordinary course of business. There were no materially
significant transactions made by the Company with promoters, directors, key managerial
personnel or other designated persons which may have a potential conflict with the
interest of the Company. There were no contracts or arrangements entered into with related
parties during the year to be disclosed under sections 188(1) and 134(3)(h) of the
Companies Act, 2013 in Form AOC 2.
Employee Stock Option Schemes
Your Company has formulated two Employees Stock Option Schemes, namely Five-Star
Associate Stock Option Scheme 2015 (ASOP 2015) and Five-Star Associate Stock Option Scheme
2018 (ASOP 2018).
The Board of Directors at their meeting held on February 25, 2023, has extended
Five-Star Associate Stock Option Scheme 2018 for a further period not exceeding five
years. Further, the Company has not made any material changes to the aforesaid schemes
during year ended March 31, 2023.
In terms of Regulation 14 of Securities and Exchange Board of India (Share Based
Employee Benefits and Sweat Equity) Regulations, 2021, the disclosures with respect to
ASOP 2015 and ASOP 2018 have been provided on the website of the Company at
http://www.fivestargroup.in.
The certificate from secretarial auditor M/s S Sandeep & Associates, Company
Secretaries confirming implementation of ASOP 2015 and ASOP 2018 scheme in accordance with
the SEBI (SBEB) Regulations and shareholders resolutions has been obtained and will be
available for inspection of the shareholders at the ensuing annual general meeting (AGM).
Pursuant to Regulation 12 (1) of Securities and Exchange Board of India (Share Based
Employee Benefits and Sweat Equity) Regulations, 2021, the ASOP 2015 and ASOP 2018 Schemes
are being placed before the shareholders for their ratification at the proposed 39th
Annual General Meeting of the Company.
The details of Five-Star Associate Stock Option Scheme 2015 and Five-Star Associate
Stock Option Scheme 2018 are enclosed as Annexure A
Annual Return
As per Section 134(3)(a) and Section 92(3) of the Companies Act, 2013 read with
Companies (Management and Administration) Rules, 2014, and Regulation 62(1)(k) of the SEBI
(LODR) Regulations, 2015, the annual return of the Company for the financial year ended
March 31, 2023 in the prescribed Form MGT-7 is available on the website of the Company at
https://fivestargroup.in/investors/.
Particulars of Loans, Guarantees or Investments
Being an NBFC, the disclosures regarding particulars of loans given, guarantees given
and security provided are exempted under the provisions of section 186(11) of the Act.
As regards investments made by the Company, the details are given in note no. 7 of the
financial statements.
Material Changes Affecting the Financial Position of the Company
There are no material changes and commitments having an adverse bearing on the
financial position of the Company between March 31, 2023, and the date of this report.
Information as per Section 134(3)(m) of the Companies Act, 2013
The provisions of Section 134(3)(m) of the Companies Act, 2013, read along with the
rules made thereunder relating to conservation of energy and technology absorption do not
apply to your Company as it is not a manufacturing Company. However, your Company has been
increasingly using information technology in its operations and promotes conservation of
resources.
During the financial year ended March 31, 2023, the foreign currency expenditure of
your Company stood at INR 6.22 Crores and there were no foreign currency earnings.
Information as per clauses (xi) and (xii) of Rule 8(5) of the Companies (Accounts)
Rules, 2014
There was no application made or any proceeding pending under the Insolvency and
Bankruptcy Code, 2016 in respect of the Company during the financial year ended March 31,
2023, and there was no such application made or any proceeding as at March 31, 2023.
The Company has not entered into any one-time settlement with its lenders during the
financial year ended March 31, 2023, and therefore the requirements of clause (xii) of
Rule 8(5) of the Companies (Accounts) Rules, 2014 are not applicable.
Significant and Material Orders passed by the Regulators or Courts or Tribunals
There are no significant and material orders passed by the Regulators or Courts or
Tribunals impacting the going concern status of your Company's and its future operations.
Risk Management
Successful lending calls for timely identification, careful assessment and effective
management of the credit, operational, market (interest-rate and liquidity) and reputation
risks. The Company has adopted efficient risk management policies, systems and processes
that seek to strike an appropriate balance between risk and returns.
The Company has also introduced appropriate risk-management measures, such as having
multiple applicants for the loan, accessing all the applicants' credit history from credit
information bureaus, field investigation of the applicants' credentials, multiple
verification layers, adoption of prudent loan to value ratio and analysis and adoption of
a conservative debt-service capacity of the borrowers, thorough in-house scrutiny of legal
documents, which helps to understand and assess the borrowers' intention and ability to
repay.
Your Company has constituted a Risk Management Committee (RMC) which interalia lays
down the review of procedures relating to risk assessment & risk minimization to
ensure that the executive management controls risk through means of a properly defined
framework and review of Credit & Portfolio Risk Management and Operational &
Process Risk Management. Your Company also has a Chief Risk Officer, who is responsible
for identification, measurement and mitigation of risks and also sensitizing the Board,
Committees and Management to any potential risks that may arise on account of
Company-specific factors or macro-economic factors.
RMC reviews the credit policy and practices to ensure that all portfolio related risks
are well mitigated. The Company has given high importance to prudential lending practices
and has put in place suitable measures for risk mitigation.
Your Company has also constituted an Asset Liability Committee (ALCO) which ensures
that the liquidity and interest-rate risks are contained within the limits laid down by
the Company.
Being dynamic, the risk management framework continues to evolve in line with the
emerging risk perceptions.
Human Resource Development
Your Company's success largely depends on the quality and competence of its human
capital. Attracting, remunerating and retaining talented professionals is therefore a key
element of your Company's business strategy. Your Company has a strong Management team
comprising of professionals with relevant experience and expertise in their domain areas,
which is supplemented by an enthusiastic execution team at the branch level, who, with
their superior execution skills, are able to bring the right results.
The customer acquisition, credit delivery, collection process and manpower strength of
Non-Banking Financial Companies operating in similar customer profile were studied to
align our staff strength after duly factoring for the differences in the business models
of other entities. Accordingly, the staff strength at the regions and branches were
streamlined, keeping in mind our acquisition process and market segment, adding people
across functional verticals wherever required.
This approach has been working well for your Company to achieve the right level of
productivity and growth. Apart from imparting advanced training to all front-line sales
and marketing, credit and other staff which included the KYC and FPC training, employees
were given on-the-job and off-the-job training programs.
Your Company has also benchmarked its compensation levels with the market, thus being
in a position to attract and retain necessary talent, which is essential for growing the
business in the years to come.
Your Company has continued to attract high quality professionals as part of the middle
and senior management team and has also been in a position to get the right resources at
the branches as well. As of March 31, 2023, your Company had 7,347 employees across
branches, regional offices, and head office.
Directors
Your Company has a well diversified Board in terms of experience and expertise and the
members of your Company's Board are eminent persons of proven competence and integrity.
They also have a strong commitment to your Company and devote adequate time to the
meetings and preparation.
The Board of Directors comprises of 8 (eight) directors, consisting of 4 (Four)
Independent Directors (including 1 woman Director), 3 Non-Executive Directors and 1
Executive Director - Chairman & Managing Director, as on March 31, 2023. The
composition of the Board of your Company as on March 31, 2023 is given below:
Name of the Director |
Designation |
DIN |
Lakshmipathy Deenadayalan |
Chairman & Managing Director |
01723269 |
Anand Raghavan |
Independent Director |
00243485 |
T T Srinivasaraghavan |
Independent Director |
00018247 |
Bhama Krishnamurthy |
Independent Director |
02196839 |
Ramkumar Ramamoorthy |
Independent Director |
07936844 |
G V Ravishankar |
Non-Executive Director* |
02604007 |
Vikram Vaidyanathan |
Non-Executive Director** |
06764019 |
Thirulokchand Vasan |
Non-Executive Director |
07679930 |
* As a nominee of SCI Investments V
** As a nominee of Matrix Partners India Investment Holdings II, LLC
During the financial year under review, the following changes took place in the
composition of the Board of Directors:
• Mr Ramanathan Annamalai (DIN: 02645247) has stepped down as an Independent
Director w.e.f May 25, 2022 due to completion of his term as Independent Director.
• Mr Ramkumar Ramamoorthy (DIN: 07936844) has been appointed as an independent
Director (additional Director) for a term of 5 years by the board at its meeting held on
June 8, 2022, and later his appointment as an independent Director was approved by the
shareholders at the Annual General meeting held on September 2, 2022.
• Mr Lakshmipathy Deenadayalan, Chairman & Managing Director (DIN: 01723269)
was re-appointed as CMD for a further period of 5 years with effect from June 01, 2022 by
the Board of Directors at its meeting held on April 27, 2022, and the same was approved by
the shareholders at the Annual General Meeting held on September 2, 2022
• During the last Annual General Meeting held on September 2, 2022, Mr Vikram
Vaidyanathan, Non-Executive Director retired by rotation and being eligible offered
himself for reappointment.
Further, following changes took place in the composition of the Board of Directors
between the financial year end and the date of this report:
- In terms of Section 152 of the Companies Act, 2013, Mr Thirulokchand Vasan retires by
rotation at the ensuing Annual General Meeting and being eligible offers himself for
reappointment. Based on the recommendation of the Nomination & Remuneration Committee
and in the opinion of your Board, Mr Thirulokchand Vasan has requisite qualifications and
experience and therefore, your directors recommend his reappointment in the ensuing Annual
General Meeting.
Declaration from Independent Directors
Pursuant to Section 149(7) of the Companies Act, 2013 read along with Rule 6 of the
Companies (Appointment and Qualifications of Directors) Rules, 2014 of the Companies Act,
2013 and Regulation 25(8) of the SEBI (LODR) Regulations, 2015, the Company has received
necessary declarations/ disclosures from each of the Independent Director of the Company
stating that he/she meets the criteria of independence as required under Section 149(6) of
the Companies Act, 2013 and that he/she has a valid certificate of registration for
his/her enrollment into the data bank for Independent Directors.
In the opinion of the Board of Directors, the Independent Directors of your Company
satisfy the necessary attributes as to integrity, experience (including proficiency) and
high levels of skill and expertise.
Formal Annual Evaluation
As per the provisions of the Companies Act, 2013, the Board has carried out an annual
performance evaluation of its own performance, the directors individually as well as the
evaluation of the working of its Committees. A structured exercise was carried out based
on the criteria for evaluation forming part of the Directors Appointment, Remuneration
& Evaluation Policy, including framework for performance evaluation of Directors,
Board & Committees, Criteria for Evaluation and the inputs received from the
Directors, covering various aspects of the Board's functioning such as adequacy of the
composition of the Board and its Committee, attendance at meetings, Board culture, duties
of directors, and governance. The aforesaid policy is available on the website of the
Company at https://fivestargroup.in/investors/.
A separate exercise was carried out to evaluate the performance of individual Directors
including the Chairman of the Board, who were evaluated on parameters such as level of
engagement and contribution, independence of judgment, safeguarding the interest of the
Company and its stakeholders etc. The Directors have expressed their satisfaction with the
evaluation process.
Committees of the Board
Your Company has the following Board level Committees, which have been constituted in
compliance with the requirements of the business and other regulatory prescriptions:
1. Audit Committee (AC)
2. Nomination & Remuneration Committee (NRC)
3. Stakeholders Relationship Committee (SRC)
4. Risk Management Committee (RMC)
5. Corporate Social Responsibility Committee (CSR)
6. IT Strategy Committee
7. Business & Resource Committee (BRC)
8. Asset Liability Committee (ALCO)
During the year under review, all recommendations made by the aforesaid Committees have
been accepted by the Board.
The details of Committee composition, terms of reference, number of meetings held, etc
are given in the Corporate Governance Report.
Key Managerial Personnel
Pursuant to the provisions of Section 203 of the Companies Act, 2013 read with the
rules made there under, the following employees are the wholetime key managerial personnel
of the Company as on March 31, 2023:
a. Mr Lakshmipathy Deenadayalan, Chairman and Managing Director (DIN: 01723269)
b. Mr Rangarajan Krishnan, Chief Executive Officer
c. Mr Srikanth Gopalakrishnan, Chief Financial Officer
d. Ms Shalini Baskaran, Company Secretary
There are no changes in the composition of Key Managerial Personnel between the
financial year end date and the date of this report.
Internal Financial Controls
The Company has a well-established and adequate internal financial control framework,
with appropriate policies and procedures, to ensure the highest standards of integrity and
transparency in its operations and a strong corporate governance structure, while
maintaining excellence in services to all its stakeholders. Appropriate controls are in
place to ensure:
(a) the orderly and efficient conduct of business, including adherence to policies,
(b) safeguarding of assets,
(c) prevention and detection of frauds/ errors,
(d) accuracy and completeness of the accounting records and
(e) timely preparation of reliable financial information.
Internal control framework including clear delegation of authority and standard
operating procedures are established and laid out across all businesses and functions.
These are reviewed periodically at all levels. The risk and control matrices are reviewed
on a periodic basis and control measures are tested and documented. These measures have
helped in ensuring the adequacy of internal financial controls commensurate with the scale
of operations of the Company.
The Company has employed an independent consultancy firm to develop and periodically
update risk control metrices, develop test plans and carry out independent testing
procedures to evaluate the effectiveness of the controls. Their findings are presented to
the Audit Committee, which helps the Committee to understand the strength of the controls
and any improvements that may be required, as the Company keeps ramping up its operations.
Your Company has also built a strong Internal Audit mechanism, where audits are done on
regular basis by in house Internal Audit team and External Internal Auditors of the
Company.
The Audit Committee of the Company regularly reviews and monitors systems, internal
controls, risk management measures, accounting procedures, financial management and
operations of the Company and also the findings and recommendations presented by the
Internal Audit team and External Internal Auditors as part of their periodic reports.
RBI, through its circular dated February 3, 2021, had introduced Risk based Internal
Audit (RBIA) framework for NBFCs. NBFCs were required to put in place a RBIA framework by
March 31, 2022. Your Company has complied with this circular, whereby a detailed RBIA
policy, outlining the audit scope, audit framework and audit frequency, which will all be
determined based on the risk inherent in each of the underlying processes, has been put in
place and approved by the Audit Committee and by the Board of Directors. Your Company had
also recruited a Chief Audit Officer, with significant years of audit experience in 2 of
the big 4 Audit firms, who has been handling the RBIA function of your Company during the
financial year under review.
Auditors
Statutory Auditors
Pursuant to Section 139 of the Companies Act, 2013 read with guidelines issued by
Reserve Bank of India dated April 27, 2021, with regard to the appointment of Statutory
Central Auditors (SCAs)/ Statutory Auditors (SAs) of Commercial Banks (excluding RRBs),
UCBs and NBFCs (including HFCs), M/s S R Batliboi & Associates LLP have been appointed
as the Statutory Auditors of your Company for a period of three consecutive financial
years viz 2021-22, 2022-23 and 2023-24 to hold office until the conclusion of the 40th
Annual General Meeting, subject to their satisfaction of the eligibility criteria every
year.
The Statutory Auditors have confirmed that they meet eligibility criteria prescribed
under Companies Act 2013 & RBI Guidelines.
The Report of the Statutory Auditors with an unmodified opinion to the members is
annexed and forms part of the financial statements and the same does not contain any
qualification, reservation, adverse remark or disclaimer. There were no frauds detected or
reported by the Auditors under sub-section (12) of section 143 of the Companies Act, 2013
during the financial year ended March 31, 2023.
Internal Auditor
To carry out internal audit of its operations, your Company has engaged M/s Sundaram
& Srinivasan, Chartered Accountants, as its External Internal Auditors. Their audit is
complemented by an In-house audit team. Between them, they cover the entire Internal Audit
Scope which covers the activities carried out at Corporate Office and across branches of
the Company. As a part of its efforts to evaluate the effectiveness of the internal
control systems, your Company's audit teams evaluate the adequacy of control measures on a
periodic basis and recommends improvements, wherever appropriate.
The Audit Committee reviews the internal audit functions, scope of internal audit, as
well as the adequacy and effectiveness of the internal systems and controls.
Secretarial Auditor
M/s S Sandeep & Associates, Practicing Company Secretaries were appointed to
conduct the secretarial audit of the Company for the financial year 2022-23, as required
under Section 204 of the Companies Act, 2013 and rules made thereunder & Regulation
24A of Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015.
The secretarial audit report for the financial year ended March 31, 2023, forms part of
this report as Annexure B and does not contain any qualification, reservation or
adverse remarks.
Cost Records and Cost Audit
Maintenance of cost records and requirements of cost audit as prescribed under the
provisions of section 148(1) of the Act is not applicable for the business activities
carried out by your Company.
Information Technology
Over the past few years, technology has become an integral part of every Company's
business operations. In line with this, your Company has also put in place a robust
technology framework, which provides for seamless business operations across the entire
business value chain including sourcing, lead generation, underwriting, sanction,
disbursement, collections and other back-office operations. Your Company has and will
continue to make significant investments in technology to leverage the strengths of API
infrastructure built by third party service providers, work towards building a robust
credit scoring model and use data analytics and machine learning extensively for
underwriting and portfolio analysis, which will help maintain strong asset quality. We
expect these initiatives to make faster and more effective decisions and also better
customer engagement and faster turnaround time.
On the security front, the IT Strategy Committee of your Company has laid down a
comprehensive policy relating to Cyber Security, Business Continuity, Outsourcing and
Information Security / Technology, in line with its terms of reference. In its continuous
efforts to ensure a secure environment, your Company has built a robust infrastructure and
carries out periodic comprehensive vulnerability assessments and penetration testing, to
identify and minimize external threats. An independent Information Systems audit has been
carried out during the financial year.
Corporate Social Responsibility (CSR)
Pursuant to Section 135 of the Companies Act, 2013 read with the Companies (Corporate
Social Responsibility Policy) Rules, 2014, your Company has adopted a Policy on CSR which
is placed on the website of the Company at https://fivestargroup.in/investors/.
As per Section 135 of the Companies Act, 2013, Your Company was required to spend an
amount of INR 9.61 Crores equivalent to 2% of the average net profits of the last three
(3) financial years as CSR contribution. During the FY 2022-23, your Company has spent an
amount of INR 9.61 Crores as against prescribed CSR Expenditure of INR 9.61 Crores.
The Annual Report on CSR activities for the financial year ended March 31, 2023, is
attached as Annexure C to this Report.
Whistle Blower Policy & Vigil Mechanism
As per the provisions of Section 177(9) of the Companies Act, 2013, and Regulation 22
of the SEBI (LODR) Regulations, 2015, your Company has established a Vigil Mechanism and
has adopted a Whistle Blower Policy for directors and employees to report their genuine
concerns. The Whistle Blower Policy has been formulated with a view to provide a mechanism
for employees and directors to approach the Audit Committee of the Company. The said
policy is available on the website of the Company at https://fivestargroup.in/investors/.
The Vigil mechanism of the Company is overseen by the Audit Committee and provides
adequate safeguard against victimization of employees and directors and also provides
direct access to the Chairperson of Audit Committee in exceptional circumstances.
During the year under review, no complaints were received by the Company and no
complaints are outstanding as on March 31, 2023.
Board & its Committees
During the financial year ended March 31, 2023, 15 (Fifteen) Board Meetings were held
on April 27, 2022, May 12, 2022, June 8, 2022, July 26, 2022, October 6, 2022, October 12,
2022, October 13, 2022, November 01, 2022, November 2, 2022, November 7, 2022, November
15, 2022, November 17, 2022, November 28, 2022, January 28, 2023 and February 25, 2023,
and not more than 120 days elapsed between any two meetings.
The details of composition of the Board and its Committees, terms of reference of the
Committees and the details of meetings held during the financial year are furnished in the
Corporate Governance Report.
Corporate Governance
Your Company is committed to maintain the highest standards of Corporate Governance and
adheres to Corporate Governance requirements set out by regulators. A report on Corporate
Governance is enclosed and form part of this report as Annexure D.
The Chief Executive Officer and the Chief Financial Officer have submitted a compliance
certificate to the board regarding the financial statements and other matters as required
under regulation 17(8) of the SEBI (LODR) 2015.
A Certificate from Practicing Company Secretary affirming the compliance of Corporate
Governance norms as required under SEBI (LODR) 2015 is annexed to the Corporate Governance
report.
Management Discussion and Analysis
A report on the Management Discussion and Analysis (MDA), highlighting the
business-wise details is attached and forms part of this report as Annexure E.
Business Responsibility and Sustainability Reporting
As per Regulation 34(2)(f) of SEBI LODR regulations, top 1,000 (one thousand) listed
entities based on market capitalization, shall attach a Business Responsibility and
Sustainability Report (BRSR) with the Annual Report, describing the environmental, social
and governance initiatives undertaken by the listed entities.
In line with this regulation, your Company has put together a BRSR report (along with
an Environmental, Social & Governance (ESG) report) which outline the initiatives
undertaken by your Company to be a respectable lender across these 3 parameters. The BRSR
report also forms part of this report as Annexure F.
Disclosures under POSH Act, 2013
The Company has in place a policy for Prevention of Sexual Harassment in line with the
requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition
and Redressal) Act, 2013 (POSH Act) and the same is available on the website of the
Company at https://fivestargroup.in/investors/. Your Company has complied with the
provisions relating to the constitution of Internal Complaints Committees (ICC) under POSH
Act. ICC has been set up to redress complaints received regarding sexual harassment.
During the year under review, no complaints were received. None was pending unresolved
as on March 31, 2023.
Particulars of Employees and Related Disclosures
In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rule
5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014,
necessary disclosures are provided in the Annual Report as Annexure G.
Code of Conduct
The board has laid down a “Code of Conduct” for all the Board Members and the
senior management of the Company and the same has been posted on the website of the
Company.
All Board members and senior management personnel have affirmed compliance with the
Company's code of conduct for the financial year 2022-23. A declaration to this effect is
included in Corporate Governance report forming part of this Annual Report.
Code for Prevention of Insider Trading
In compliance with the PIT guidelines issued by SEBI, as amended from time to time,
your Company has adopted the following policies / codes of conduct:
a. Code of Conduct for Regulating, Monitoring and Reporting of Trading by Insiders
b. Company's Code of Practices and Procedures for Fair Disclosure of Unpublished Price
Sensitive Information (UPSI)
to regulate, monitor and report trading by insiders in securities of the Company. The
objective of this code is to protect the interest of the shareholders at large, to prevent
misuse of any price sensitive information and prevent insider trading. The board has
further approved policy governing the procedure of inquiry in case of actual or suspected
leak of unpublished price sensitive information. The code has also been hosted on the
website of the Company.
Investor Relations
In order to ensure that your Company stays engaged with all the investors (current and
potential) and analysts, your Company has put together an Internal Investor Relations
team, which will ensure transparent and adequate disclosures viz. periodic earnings calls,
video-conferences, conference participations and one-on-one meetings. The intent to be
seen as a benchmark in terms of investor outreach.
Your Company also ensures that critical information is made available to all the
investors through upload of such information on the website. Your Company also intimates
Stock exchanges regarding upcoming events like earnings calls, declaration of quarterly
and annual results and such other information which could potentially have a bearing on
the share price of the Company. Additionally, your Company also discloses to the Stock
exchanges, any potential meetings with investors / analysts who have evinced their
interest to meet up with the Management team.
Directors' Responsibility Statement
The Board of Directors have instituted / put in place a framework of internal financial
controls and compliance systems, which is reviewed by the management and the relevant
board committees, including the audit committee and independently reviewed by the
auditors.
Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, confirm
that:
a. in the preparation of the annual accounts, the applicable accounting standards have
been followed along with proper explanation relating to material departures;
b. the Directors have selected such accounting policies and applied them consistently
and made judgments and estimates that are reasonable and prudent so as to give a true and
fair view of the state of affairs of the Company at the end of the financial year and of
the profit of the Company for that period;
c. the Directors have taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of this Act for safeguarding the
assets of the Company and for preventing and detecting fraud and other irregularities;
d. the Directors have prepared the annual accounts on a going concern basis;
e. the Directors have laid down internal financial controls, which are adequate and
operating effectively and
f. the directors have devised proper systems to ensure compliance with the provisions
of all applicable laws and that such systems were adequate and operating effectively.
Acknowledgement
Your Directors wish to thank the shareholders, customers, employees, bankers, non-bank
lenders, mutual funds, financial institutions, debenture trustee, R&T agent, credit
rating agency, auditors for their co-operation and continued support to the Company during
the pandemic. The directors also thank the employees for their contribution during the
financial year under review.
|
For and on behalf of the Board of Directors |
|
Lakshmipathy Deenadayalan |
Place: Chennai |
Chairman & Managing Director |
Date: May 09, 2023 |
DIN:01723269 |
1. FIVE STAR ASSOCIATE STOCK OPTION SCHEME, 2015
The decision to introduce FIVE STAR Associate Stock Option Scheme, 2015 (hereinafter
called “FIVE STAR ASOP, 2015” or “The Scheme”) was taken by the Board
of Directors at their meeting held on September 18, 2015 and was approved by the
shareholders of the Company at the Extra Ordinary General Meeting held on April 12, 2016.
Consequent to the sub-division of the face value of Equity shares of the Company, the
Scheme was amended to that effect, which was approved by the Shareholders at their meeting
held on October 08, 2021.
Pursuant to Rule 12(9) of Companies (Share Capital and Debentures) Rules, 2014, the
details of the Five Star Associate Stock Option Scheme, 2015 as on March 31, 2023, are:
a) Options approved to be issued as ESOPs: 56,30,000
b) Options granted: 56,13,830
c) Options vested: 55,57,000
d) Options exercised: 54,46,000
e) The total number of shares arising as a result of exercise of option: 54,46,000
f) Options lapsed / Surrendered: 16,170
g) Exercise Price: Such price not less than the face value, as may be determined by the
Nomination & Remuneration Committee
h) Variation of terms of options: Nil
i) Total number of options in force: 167,830
j) Money realized by exercise of options: INR 179.31 lakhs
k) Employee wise details of options granted to:
(i) Key managerial personnel: Mr Rangarajan Krishnan - Chief Executive Officer -
32,00,000 options, Mr Srikanth Gopalakrishnan -Chief Financial Officer - 10,00,000 options
and Ms Shalini Baskaran - Company Secretary - 5,300 options
(ii) Any other employee who receives a grant of options in any one year of option
amounting to 5 per cent or more of options granted during that year: Nil
(iii) Identified employees who were granted option, during any one year, equal to or
exceeding one percent of the issued capital (excluding outstanding warrants and
conversions) of the Company at the time of grant: Mr Rangarajan Krishnan - Chief Executive
Officer - 32,00,000 options and Mr Srikanth Gopalakrishnan -Chief Financial Officer -
10,00,000 options
2. FIVE STAR ASSOCIATE STOCK OPTION SCHEME, 2018
The decision to introduce FIVE STAR Associate Stock Option Scheme, 2018 (hereinafter
called “FIVE STAR ASOP, 2018” or “The Scheme”) was taken by the Board
of Directors at their meeting held on February 28, 2018 and was approved by the
shareholders of the Company at the Extra Ordinary General Meeting held on March 26, 2018.
Consequent to the sub-division of the face value of Equity shares of the Company, the
Scheme was amended to that effect, which was approved by the Shareholders at their meeting
held on October 08, 2021.
Pursuant to Rule 12(9) of Companies (Share Capital and Debentures) Rules, 2014, the
details of the Five Star Associate Stock Option Scheme, 2018 as on March 31, 2023, are:
a) Options approved to be issued as ESOPs: 50,00,000
b) Options granted: 49,69,300
c) Options vested: 21,66,660
d) Options exercised: 10,32,000
e) The total number of shares arising as a result of exercise of option: 10,32,000
f) Options lapsed / Surrendered: 30,700
g) Exercise Price: Such price not less than the face value, as may be determined by the
Nomination & Remuneration Committee
h) Variation of terms of options: Nil
i) Total number of options in force: 39,37,300
j) Money realized by exercise of options: INR 708.26 lakhs
k) Employee wise details of options granted to:
(i) Key managerial personnel: Mr Rangarajan Krishnan - Chief Executive Officer -
30,00,000 options, Mr Srikanth Gopalakrishnan - Chief Financial Officer - 10,00,000
options and Ms Shalini Baskaran - Company Secretary - 10,000 options
(ii) Any other employee who receives a grant of options in any one year of option
amounting to 5 per cent or more of options granted during that year: Nil
(iii) Identified employees who were granted option, during any one year, equal to or
exceeding one percent of the issued capital (excluding outstanding warrants and
conversions) of the Company at the time of grant: Mr Rangarajan Krishnan - Chief Executive
Officer - 30,00,000 options
|
For and on behalf of the Board of Directors |
|
Lakshmipathy Deenadayalan |
Place: Chennai |
Chairman & Managing Director |
Date: May 09, 2023 |
DIN:01723269 |
